Wrong zip code? Do not pass go. Do not move up the ladder. That’s the reality found in a survey reported this morning by the New York Times. Across the country, data shows destiny is tied to the zip code where you live. Live in a poverty-level zip code? Chances are, you won’t get rich. According to the NYT:
“All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.”
In other words, where there is less housing segregation by income, children have a better chance of upward mobility.
That’s not all. Different parts of the country show different degrees of mobility.
“Yet the parts of this country with the highest mobility rates — like Pittsburgh, Seattle and Salt Lake City — have rates roughly as high as those in Denmark and Norway, two countries at the top of the international mobility rankings. In areas like Atlanta and Memphis, by comparison, upward mobility appears to be substantially lower than in any other rich country, Mr. Chetty said.”
How do we rate? In the Minneapolis area, nine percent of children raised in families in the lower 20 percent of the income spectrum manage to rise to the top fifth. That makes the Twin Cities a lot better than most southern states but much worse than North Dakota. Outside the metro area, many areas of the state do even better, with bottom-fifth-to-top-fifth mobility of 16 percent for the Willmar area and 17.9 percent for Worthington, for example. (See the NYT story for an interactive map.)
Bottom-fifth-to-top-fifth isn’t the only measure of mobility. On average, in the Twin Cities metro area, a child who grows up with parents earning in the 10th percentile (bottom 10 percent of income levels) ends up in the 40th percentile.
Location, of course, isn’t the only factor. Children of high-income parents are far more likely to earn high incomes when they grow up. The NYT reports:
“Whatever the reasons, affluent children often remain so: one of every three 30-year-olds who grew up in the top 1 percent of the income distribution was already making at least $100,000 in family income, according to the new study. Among adults who grew up in the bottom half of the income distribution, only one out of 25 had family income of at least $100,000 by age 30.”
Also highly significant, according to the New York Times:
“Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.”
The study itself tried to figure out the impact of taxes on mobility. The researchers found an impact, though it is not as great as the other factors identified. Generally, states with higher state income tax rates and with more progressive income taxes (higher taxes on higher incomes) had higher intergenerational mobility.
Geography may not be destiny, and your parents’ income doesn’t determine your own, but both are pretty significant factors. For me, two big lessons from the study are:
1) Mixing it up is good for kids — neighborhoods and schools with less segregation by income help kids to earn higher incomes as adults.
2) Higher and more progressive state tax rates can help children from poor families climb higher on the economic ladder.